Landmark GST refund ruling in Malaysia

The High Court in Malaysia allowed the taxpayer’s judicial review application to challenge the decision of customs in rejecting the taxpayer’s application for input tax credit refund (ITC refund). 

In 2018, the taxpayer had incorrectly accounted for goods and services tax (GST) to customs in the GST returns filed by them. The taxpayer did not take into account tax invoices for staff labour costs which was incurred in the course of the taxpayer’s business. This resulted in the taxpayer having over accounted for GST by not offsetting the input tax credit against the output tax. 

The taxpayer applied for the ITC refund, which was rejected by customs as it was not made within 120 days from the appointed date. Dissatisfied by the custom’s decision, the taxpayer filed court proceedings. 

The main argument of the taxpayer was that had the GST Act 2014 not been repealed, the taxpayer would be entitled to claim for ITC refund as a claim can be made within six years. 

As the GST Repeal Act 2018 allows refund for tax overpaid or erroneously paid to be made as if the GST Act 2014 was not repealed. The argument was that both Acts must be read together with the principle that the repeal of a written law in whole or in part shall not affect any right accrued or incurred under the repealed law.

The customs argument was that the GST Repeal Act 2018 stipulates that ITC refund must be made within 120 days from the appointed date and thus, the taxpayer was out of time.

The High Court ruled that customs had erroneously rejected the taxpayer’s claim for an ITC refund. The taxpayer was awarded the ITC refund with 8% interest running from the date the refund was due. This is the first case of its kind in Malaysia where the scope of the GST Repeal Act 2018 in relation to input tax refund was examined by the High Court. 

The taxpayer was successfully represented by S Saravana Kumar and Datuk DP Naban from the tax, SST and customs practice of the law firm, Rosli Dahlan Saravana Partnership (RDS).

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